AUD could retest the March lows if the Fed are not that dovish

22 Mar 2023

AUD/USD is hinting at a potential swing high on the daily chart. And if my hunch that the Fed won’t be as dovish as market pricing currently suggest, it leaves room for USD strength and a lower Aussie.

AUD/USD seems to have completed a 3-wave retracement which perfectly respected a 38.2% Fibonacci ratio. Our bias remains bearish beneath the cycle highs, and we anticipate a move back to the March lows should the Fed stick to their hawkish guns, given the RBA delivered a dovish hike and dovish minutes this month.

22 Mar 2023

Catatan

If the Aussie reversed all initial gains from a supposed ‘dovish’ Fed hike, we still prefer shorts. Furthermore, sentiment is now a little fragile again thanks to Yellen’s comments about not guaranteeing all US banking deposits. Yesterday’s high perfectly respected the 200-day MA and closed the day with a bearish hammer. From here, bears can either fade into minor rallies within yesterday’s range or wait for a break of yesterday’s low.

23 Mar 2023

Catatan

Two bearish hammers on the daily chart, as each daily rally fails to hold onto gains.

Markets continue to price in Fed cuts despite Powell's firm pushback on cuts this year - so it is a repeat of the February meeting so far (and we expect Fed members to now read from the same hawkish script over the coming week/s).

Weak PMI data from Australia hardly inspires the RBA to hike, and a bullish hammer has formed on the US dollar index. The bias remains short until momentum rips higher with a convincing daily close.